This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Dow Chemical Rejects Loeb Breakup Plan

NEW YORK ( The Deal) --  Dow Chemical (DOW - Get Report) has rebuffed a suggestion by activist Dan Loeb to split the company in two, saying that an internal review has concluded that such an action would reduce the company's overall value.

Loeb's Third Point LLC on Jan. 21 disclosed a large stake in Midland, Mich.-based Dow, and called on the company to consider selling its petrochemical operations. The investor in his quarterly letter said Dow is Third Point's largest investment, but said that the company's shares have "woefully underperformed over the last decade."

Third Point did not disclose the size of its stake, but according to reports, the firm spent about $1.3 billion amassing Dow shares. The company is valued by the market at about $55.3 billion.

Dow in an addendum to its end of year investor presentation said its board, in conjunction with external advisers, determined that selling the petrochemical operations would negatively impact Dow's bottom line by eliminating certain economies of scale and cross-platform technology benefits.

Must Read: Gates' Optim Energy Cascades Into Bankruptcy

The company, without mentioning Third Point or Loeb by name, said that the review concluded that separating its petrochemical and specialty chemical assets "created no productivity or capital allocation improvements." The response was expected. Dow chairman and CEO Andrew Liveris on a Jan. 29 earnings call defended the company's current business mix.

Third Point on Wednesday told reporters the firm was willing to sign a non-disclosure agreement to review and discuss the analysis that led Dow to its conclusions.

Dow is no stranger to restructuring. The company in 2008 kicked off a transformation aimed at shedding lower-margin units and focusing on higher-priced specialty materials by acquiring Rohm and Haas Co. for $18.8 billion. In the years since, Dow has retained advisers to explore separation options for units totaling $5 billion in annual sales, including, in December, hiring bankers to sell its century-old chlorine operation. The company has also closed numerous plants and slashed jobs.

The firm said Tuesday it would continue with that revamp.

"Dow believes that the specific actions it has taken to transition Dow from a commodity-based model into a vertically integrated science company focused on specialty materials, agriculture, and specialty plastics, is the right strategy to maximize value for all of our shareholders in the short and long term," the company said in the regulatory filing.

Loeb in his January investment letter criticized the existing strategy, calling the Rohm & Haas deal, which almost fell apart due to recession-related funding issues, "ill-timed."

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
DOW $46.72 0.26%
AAPL $111.98 0.34%
FB $95.20 1.00%
GOOG $652.09 0.84%
TSLA $220.56 2.30%


Chart of I:DJI
DOW 17,121.04 -10.82 -0.06%
S&P 500 2,014.89 +15.91 0.80%
NASDAQ 4,835.6330 -3.01 -0.06%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs